Demonstrate an understanding of the impact on the entire economy, based on any changes in taxes required, if the government is to purchase any extra product that is not sold to consumers.

Competitive market

In a scenario in which a government tries to improve the financial position of the sellers, in such a perfectly competitive market, by instituting a legal price floor that is significantly above the equilibrium price. A price floor is the lowest price for which a seller can legally sell the product.

Calculate the consumer surplus, producer surplus, and total surplus both before a price floor is established and after a price, the floor is enacted.

Demonstrate an understanding of the impact on the entire economy, based on any changes in taxes required, if the government is to purchase any extra product that is not sold to consumers.